Justice Department Policy Changes, Part II
We now have more clarity on attorney general Pam Bondi’s plan to overhaul Justice Department enforcement priorities — and yes, it’s going to be a big retreat from holding corporations accountable for certain types of misconduct, while the department spends more time prosecuting drug cartels, illegal aliens, and organizations with DEI programs.
Bondi first announced her priorities on Wednesday, mere hours after being sworn into office. The policy shifts came fast and furious, but most notable to corporate compliance officers was this: that enforcement of the Foreign Corrupt Practices Act will shift away from companies that pay bribes to foreign officials to win business contracts, in favor of cases that involve bribery of foreign officials who “facilitate human smuggling and the trafficking of narcotics and firearms.”
Now we have a copy of the memo that Bondi sent to Justice Department prosecutors Wednesday night. The basic story is still true: fewer resources for fighting the corporate corruption that has dominated FCPA enforcement for 20 years, more resources for chasing down drug cartels, human traffickers, and transnational criminal organizations.
A few key policy shifts, however, could make FCPA compliance even more complicated for a certain subset of companies.
Under Bondi’s new enforcement policy, local U.S. attorneys will have the power to launch their own FCPA cases, although those cases will be more focused on cartels and international crime gangs rather than corporate corruption.
Let’s say that again for emphasis: federal prosecutors across the United States will have more discretion to bring FCPA cases, but under a narrower scope of FCPA offenses. That’s a big change. It means lots of companies will now have far less criminal enforcement risk from the FCPA; but a smaller subset of companies will likely have more risk.
For example, if you’re a shipping company with business throughout Latin America, or a maker of equipment that could be used to produce drugs illegally, or a business that helps bring “students” into the United States on visas of some kind; you could have multiple investigations from multiple directions, where the local U.S. attorney decides at the end, “and let’s add an FCPA charge while we’re at it.”
On the other hand, if you’re, say, an equipment manufacturer selling goods to foreign governments in places like South Asia or Africa — it’s now open season to approve all those “discounts” for resellers, I guess? I mean, you’d still be terrible people for engaging in such corruption, but the Trump Administration will no longer frown upon that sort of terrible behavior. Considering the felon fellow we have in the Oval Office, that’s no surprise.
More Policy Shifts
Bondi also closed up shop for all Justice Department teams enforcing sanctions against Russian kleptocrats. The department’s Task Force KleptoCapture and the Kleptocracy Asset Recovery Initiative — both disbanded, with prosecutors on those teams reassigned to cartels and other criminal gangs (assuming those prosecutors even stay with the Justice Department at all).
Again, this is not a surprise given who’s in the Oval Office. What’s unclear (to me, at least) is whether Bondi’s retreat from sanctions enforcement against Russia signal a larger retreat from sanctions enforcement in general. That would make no sense geopolitically. The Trump Administration should want more tools to bring pressure to China, Iran, and other adversaries, and sanctions are a great way to do that.
As a practical matter, however, another question is whether the department will devote so many resources to cartels, internal immigration enforcement, and DEI crackdowns that there won’t be anyone left to do any substantive sanctions enforcement even against the countries that Trump doesn’t like. We’ll have to wait and see.
One last wrinkle in all this is money-laundering risk. Bondi’s memo does say that the department’s Money Laundering and Asset Recovery Section will prioritize investigations, prosecutions, and asset forfeiture actions related to cartels and criminal gangs; and that’s certainly sensible. So what are the corporate compliance implications for that increased scrutiny?
For example, if you’re a company that bribes a foreign government official for some cartel or criminal gang offense — well, I’m not clear on what that corrupt transaction would even look like or how it would come to pass, but at least someone in your business would know that he or she is bribing a government official.
Money laundering is different; cartels and other criminals might be using your financial transaction system without you knowing, through fake documentation or small-scale transactions that don’t meet a scrutiny threshold or some other trickery. So for firms with high AML risk, you’ll need to give more thought to whether your AML compliance program is up to the task now that the Justice Department is devoting more resources here.
Anyway, that’s enough for today. There’ll be plenty of time for plenty more analysis in the future.